The Monetary Policy Council (RPP) of the National Bank of Poland (NBP) will continue to raise interest rates until it is sure that inflation has permanently reduced, the NBP’s governor said on Friday.
Poland’s inflation rate hit a 24-year high last month of 12.3 percent.
Adam Glapinski told a press conference: “The Monetary Policy Council has raised interest rates for several months. We will continue to do it until we achieve certainty that inflation will permanently decrease.”
He added that this was “sad news” for many affected by high-interest rates but “good news” for those interested in the condition of the economy as a whole.
The NBP Governor went on to say that few countries could “boast such a favourable economic performance” as Poland, which, he said, was the best empirical evidence that the fight against inflation was occurring “at the appropriate pace and with the correct dynamic in the growth of interest rates”.
If the interest rates were wrong, he argued, Poland would be experiencing stifled economic growth, no wage growth and unemployment.
Glapinski also reported that in the first quarter of the year, GDP growth had probably accelerated to as much as 8 percent, despite “severe inflation and a tense geopolitical situation.” He also highlighted a strong labour market and low unemployment.
“We have exceeded the level of employment from before the pandemic, with double-digit wage growth,” he said.
“Maintaining high growth with record low unemployment in a situation where a war is going on across our eastern border – the biggest since World War II – testifies to the huge strength of the economy and huge motivation of Poles,” he said.
Glapinski also said the RPP’s intention was for interest-rate hikes to occur in tandem with a high rate of economic growth and low unemployment. He said that in the “not too distant future” the time would come to cut rates but that for now, the priority was to rein in inflation.
The NBP governor said he currently hoped interest rates would start coming down at the end of next year.
“The burden on households of loan rates is high and rising, but the burden on households in recent years has been exceptionally low,” he said, explaining that for the last 18 months, interest rates had been low due to the pandemic crisis.
“At a certain moment, I hope that at the end of 2023, borrowers will hear that interest rates are going down,” Glapinksi said.